Documentary contradiction of seized entry prevents estimating unexplained cash; diary decoding and bank statements accepted.

Seized ledger and digital entries were decoded to show the contested Rs. 5,00,000 item was recorded as a cheque entry and not cash; the assessee produced bank statements that did not evidence receipt of that amount and the diary linked the entry to a different concern. Because the seized material itself and bank records documentary contradict the basis for treating the item as unexplained cash, the application of a 35% gross profit estimate on that alleged cash receipt was rejected and the estimated addition was deleted.

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Issues: Whether the addition made by estimating gross profit at 35% on an alleged cash receipt of Rs. 5,00,000 (based on seized diary and digital data) was justified, or whether the assessee's explanation supported by bank statements and the diary decoding negates the addition.

Analysis: The seized diary entries and digital data were examined alongside the assessee's bank statements and the decoding of symbols in the seized diary (alphabetic markers denoting cheque or cash). The entry for Rs. 5,00,000 appearing in the diary was shown by the diary's own notation to be a cheque entry (not cash). The assessee produced complete bank statements which did not show receipt of the Rs. 5,00,000. The diary also contained a separate ledger reference indicating a different business name for that entry. In view of these documentary trails, the asserted cash receipt was plausibly explained either as a cheque not actually received or as pertaining to a different concern, undermining the basis for treating the amount as unexplained cash business receipt and for estimating gross profit thereon.

Conclusion: The addition of Rs. 1,75,000 made by applying a 35% gross profit estimate on the alleged Rs. 5,00,000 cash receipt is deleted; the assessee's explanation supported by bank statements and diary decoding is accepted and the addition is not sustained.

Ratio Decidendi: Where a seized entry is shown by the seized material itself to denote a cheque (not cash) and the assessee produces bank statements disproving receipt of the amount, the entry cannot be treated as an unexplained cash receipt for making an estimated addition; documentary contradiction of the basis for estimation negates the addition.

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